Agenda - 09-20-2022; 8-a - Minutes

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2 1 2. Ratification of County Manager's Execution of an Insurance Coverage Agreement with 2 Travelers Insurance and Approval of a Letter of Credit Agreement 3 4 The Board ratified the County Manager's execution of an agreement with Travelers Indemnity 5 Company for Casualty and Workers' Compensation insurance coverage and approved a Letter 6 of Credit for Travelers Indemnity Company. 7 8 BACKGROUND: As part of a comprehensive risk management program, the County 9 purchases liability, property, and workers compensation insurance. Those programs had been 10 purchased through the North Carolina Association of County Commissioners' Risk Pools. The 11 County marketed these programs in 2022 and has moved these programs to Travelers 12 Indemnity Company (Travelers). 13 The Travelers coverage offered a premium savings of over $250,000, provided more robust risk 14 control and claim advocacy, and provided access to a state of the art risk management 15 information system. The Travelers proposal also included a dedicated, as opposed to shared, 16 policy limits for each claim category with the same or better coverage limits and deductibles 17 compared to the County's former provider. Due to the timing of this conversion, the County 18 Manager signed the agreement to purchase this insurance coverage from Travelers. This 19 agenda item seeks ratification of the County Manager's signature from the Board of 20 Commissioners. 21 In addition, Travelers is requiring the County to secure a $300,000 letter of credit to guarantee 22 the County is in a position to meet its financial obligations under the terms and conditions of the 23 policy. This amount is equivalent to the per claim deductible for the Workers Compensation 24 coverage. The letter of credit would only be accessed if the County failed to pay a part or all of 25 the deductible. This practice is consistent with industry standards for loss programs. 26 The County's current bank, Truist, will provide a letter of credit not to exceed $500,000 for a rate 27 of 0.5% if it needs to be accessed by Travelers. Even though the FY2022-23 Budget contains 28 sufficient funding to pay deductibles, Truist is requiring Board approval of the letter of credit 29 since the bank considers it a debt instrument. 30 31 John Roberts introduced the item. He said the county received quotes from insurance 32 carriers after the Board's meetings ended for the previous fiscal year. He said the county would 33 save $260,000 a year by entering into an agreement with Travelers. He said initially there was 34 nothing that indicated that a follow-up Board meeting would be required. He said Travelers 35 required a letter of credit, and the county's bank, Truist, required that the letter of credit be 36 approved by the Board of Commissioners. 37 Gary Donaldson, Chief Financial Officer, said the letter of credit would be treated as a 38 pre-paid expense on the balance sheet. He said this is a required step by the bank. He said 39 funds are budgeted in the FY23 budget for the expense. 40 Commissioner McKee asked why the county would need to draw on the funds. 41 Gary Donaldson said it would be extremely unlikely. 42 Commissioner McKee asked why the cap on the letter of credit is $500,000 and not 43 $300,000 as requested by Travelers. 44 Gary Donaldson said the $500,000 cap provides additional flexibility. 45 Commissioner Fowler asked what the purpose is of the letter of credit. 46 Gary Donaldson said the county does not expect claim amounts that would trigger a 47 draw on the letter of credit. He said there are budgeted funds for claim amounts. He said the 48 letter of credit is a requirement from Travelers. He said this is additional security. He said it 49 would be an extraordinary event to draw on the funds. 50 Commissioner Fowler asked what the letter of credit would be used for, premiums or 51 claims.